MGT252. Project Finance and Budgeting
Assignment 2

1.	What are the two budgets of major concern for a project?  Describe the purpose of each.

2.	What is the difference between a Static Budget and a Flexible Budget?  What are the pros and cons of each?

3.	What are the four constraints that must be considered when developing a project budget?  Why?

4.	In doing risk analysis for your project, you have identified the following risks items:
Risk	P (Risk Probability)	I (Cost Impact)	Risk Contingency	
A	.7	$20,000		
B	.25	$30,000		
C	.5	$16,000		
D	.10	$45,000		
E	.3	$18,000		
F	.30	$10,000		
Total	 	$139,000		

a) Calculate the expected value of each of these risks.  
b) How much would you request for this project to be added to your budget as risk contingency?  
c) Why wouldn’t you request the entire $139,000?  
d) What would you do in the event Risk D occurs?